Last week I had a chance meeting with one of my old friend after almost a couple of years. We decided to catch a coffee and during our conversation I was surprised to know that the guy had just lost his job with almost paltry savings and a big debt. This friend of mine when we last met had a great job, big car and house and an enviable bank balance.
Why he ended up like this?? Money gives wrong illusion of one getting richer. Now my friend was earning handsomely but he was piling up liabilities instead of building assets. Another reason was greed and my friend fell for what appeared to be the quick fix way of getting rich.
Armed with his good salary he took housing loan, car loan and personal loan. The worst part was personal loan was used to invest in the stock markets. But as any party ends, markets fell precipitously, as a result this fellow not only lost the money but his house and car too in absence of income.
Let’s learn some lessons as this can happen to anyone:
1. Never borrow to invest in equity. Leverage in stock market is poisonous and should be avoided.
2. Do diversification but not much.
3. Try to invest periodically and regularly.
4. Choose mutual funds over direct equity if you lack the knowledge and competence or don’t have time.
5. Hire the services of a good financial advisor. It’s worth to have someone to take care of your personal finances and to handhold you in difficult situations.
Kindly remember, your life or equity investments are not a 100 meters sprint race but are more like marathon. Play your game accordingly. “Investing is about making money in the future.”-Always remember Wealth cannot be earned, Wealth can only be created.